Decided on August 26,2016

IN RE Appellant
K P R AGROCHEM LTD Respondents


Rajeswara Rao Vittanala, Member - (1.)The application was initially filed before Company Law Board, Chennai Bench, Chennai. Since, NCLT, Hyderabad Bench has been constituted for the cases relating to the states of Andhra Pradesh and Telangana, the case is transferred to Hyderabad Bench. Hence, we have taken the case on records of NCLT, Hyderabad Bench and deciding the case. The present application filed by the 14 applicants as mentioned above under section 621A read with section 295 of the Companies Act, 1956 and Regulation 14 of the Company Law Board Regulations, 1991.
(2.)K.P.R. Agrochem Limited was originally incorporated as K.P.R Fertilizers Private Limited on 2nd January, 2007 as Private Limited Company and converted in to Public Limited Company on 19th December, 2008. The Corporate Identity Number (CIN) of the company is U24129AP2007PLC052216. On 21st September 2015, the company has changed its nature to K.P.R. Agrochem Limited. The Registered Office of the Company is situated at Door No. 8-256, Tata Nagar, Balabhadrapuram-533 343, Andhra Pradesh.
Authorised Share Capital is Rs. 125,00,00,000/- (Rupees One Hundred and Twenty Five Crores only) divided into 12,50,00,000 (Twelve Crores Fifty Lakhs) shares of Rs. 10/- (Rupees Ten) each. Paid up capital is Rs. 85,46,40,000/- (Rupees Eighty five Crores Forty Six Lakhs Forty Thousand only) divided into 8,54,64,000 (Eight Crores Fifty Four Lakhs Sixty Four Thousand) fully paid up equity shares Rs. 10/- (Rupees Ten) each. The present business activities of the company is manufacture of fertilizers and chemicals.

(3.)It is stated in the application that the company has given collateral security without obtaining the approval of the Central Government, to the following companies, in which the directors of the applicant company are also directors/members and to the firms in which either directors of the Applicant No. 1 Company or their relatives are partners.
As per section 295 of the Companies Act, 1956, no company can directly or indirectly make any loan to or giving guarantee or provide any security in connection with a loan made by any other person, without obtaining previous approval of the Central Government by the following persons:

"(a) any director of the lending company or of a company which is its holding company or an partner or relative of any such director;

(b) any firm in which any such director or relative is a partner;

(c) any private company of which any such director is a director or member,

(d) anybody corporate at a general meeting of which not less than twenty-five percent of the total voting power may be exercised or controlled by any such director or by two or more such directors together; or

(e) anybody corporate, the Board of directors, managing director, or manager whereof is accustomed to act in accordance with the directions or instructions of the board, or of any director or directors of the lending company."

As per section 295(3) if the above acts are done without the previous approval of the Central Government, the concerned company has to either obtain the approval of the Central Government to the transaction or enforce the repayment of the loan or in connection with the guarantee given or to the security provided, notwithstanding any agreement to the contrary within 6 months from the commencement of the Act or further extension of not exceeding 6 months with the grant of Central Government. As per section 295(4) of the Companies Act, 1956, every person who is knowingly the party to the contravention of sub-section (1) or (3) including any particular person to whom the loan is made (or) who has taken the loan in respect of which guarantee is given or the security is provided, shall be punishable either with fine which may extend to Rs. 50,000/- or with simple imprisonment for a term which may extend to 6 months.

It is further stated that the applicants have committed the said violation without any mala fide intention, wilful or wanton. It is further contented that the above violation did not cause any prejudice to any of the shareholders or any other stakeholders. They also contend by accepting the violation as mentioned above and voluntarily approaching this Tribunal for compounding under section 621A r/w 295 of the Companies Act, 1956.


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